Tata Realty Initiatives Fund-I, managed by Tata Realty and Infrastructure Ltd, has bought over Kotak India Real Estate Fund-I, a $100 million (Rs.450 crore) fund managed by Kotak Realty Fund in Peepul Tree Properties Pvt. Ltd for Rs.385 crore.
The deal comes at a time when property developers are finding it tough to raise money from lenders, the capital market and private equity investors. Lenders have tightened norms to realty firms and private equity funds are seeking lower valuation to invest in them.
Through this exit, Kotak Realty has managed to return the entire corpus to its investors or limited partners. The enterprise value—sum of equity investments and debt—of Peepul Tree is Rs.525 crore. The company has a debt of Rs.140 crore.
“The attraction for us is that this is already an income-generating asset and we have pension funds as investors who like a steady income,” said Kishore Saletore, chief financial officer, Tata Realty and Infrastructure.
With this investment, Tata Realty and Infrastructure has fully deployed its $750 million fund. The fund’s investments have been mostly greenfield projects such as Ramanujan IT special economic zone in partnership with Tamil Nadu Industrial Development Corp. in Chennai, high-end residential asset in Kochi and a housing project in Nagpur.
“Our investment in Peepul Tree and subsequent exit is a classic example of our approach to real estate investing and fund management,” said S. Sriniwasan, chief executive, Kotak Realty Fund, which manages around $800 million in funds. “We are actively pursuing exit opportunities in our first fund.”
In 2006, Kotak Realty had invested Rs.95 crore in Peepul Tree, which owns a 700,000 sq. ft information technology (IT) park in Goregaon, a Mumbai suburb, thus making a four-fold return on its investment.
